When Behaviour Psychology Meets Product Management

Human minds are complex, full of desires and paradoxes that make them so unpredictable at times. This is the challenge faced by all product designers and managers. Essentially, their job is to predict customer behaviour by coming up with new ideas and features that they think will be appreciated by customers. Often time, they are disappointed to find out in the end that efforts have been wasted as customers behave in a completely different way from what they expect.

Understanding behavioural psychology can serve a business well. The principles of behavioural psychology can be harnessed by a product team to understand potential strengths and flaws of a product idea and ultimately create something impactful and desirable for their customers.

Psychologist and Nobel prize laureate Daniel Kahneman, along with many leading behavioural economists and psychologists have done extended research to understand how our minds work. Based on their findings, McKinsey has developed the CHOICES framework (which stands for “context, habit, other people, incentives, congruence, emotions, and salience”) to categorize. See below a nice cheat sheet with definitions and examples:

Researchers have also found that during any customer experience, there are three factors that impact the level of customer satisfaction:

· Sequence: the order of high and low points of a customer journey can materially affect the perception of the product. Specifically, unpleasant endings have a strong negative impact that can potentially erase most of the positive perception built up previously

· Segments: the frequency of high and low points also contribute to how customers perceive the product at the end

· Control: giving customers control and allowing them to choose what they receive can increase their satisfaction level

A few examples from McKinsey’s research:

Learning about behavioural psychology of your customers can also help you uncover “hidden competitors”. Take Uber as an example. Who are Uber’s competitors? The obvious ones are taxis and other ride-sharing apps like Lyft. However, if we think about it from a psychological perspective, the behaviour that Uber wants their customers to do is “get out of the house and use Uber to get around”. This is getting increasingly difficult to achieve these days given the plethora of apps and products that are designed to keep you in your house while still providing what you need: Netflix, Deliveroo, Amazon Fresh, Blue Apron, just to name a few. These are all competitors for Uber in a sense so their decision to launch their own food delivery service is a reasonable and logical strategy given their customers’ behaviour.